It’s not just large corporates that can access the Australian Government’s Research and Development (R&D) Tax Incentive program. The program is very focused on providing support for small to medium enterprises (SMEs) and start-ups who can access substantial cash refunds on eligible R&D activities.

What is the R&D Tax Incentive program?

The R&D tax incentive is a self-assessment program designed to encourage Australian businesses to conduct research and development. The program provides a tax incentive, where there is a need to conduct experimental activities for the purpose of generating new knowledge.

The R&D tax incentive program provides Australian resident companies (and foreign companies operating a business via an Australian permanent establishment) with a tax offset in respect of qualifying expenditure incurred on eligible R&D activities that have been registered with AusIndustry.

Am I eligible for the R&D Tax Incentive?

Do you undertake activities that are seeking to resolve technical challenges where the answer is not able to be readily identified based on currently available knowledge?

Do these initiatives require a series of experimental activities to resolve the technical challenges?

Will the experimental activities ultimately result in new knowledge being generated in the form of new or improved materials, products, devices, processes or services?

Yes, if you are in a corporate entity (i.e. not a trust or individual) and if your business engages in eligible R&D activities.

The R&D program was originally designed to provide additional support and an increased rate of benefit for SMEs involved in R&D activities. Lack of access to funding, in order to progress R&D activities, is a common issue for SMEs and start-ups. Knowing how to increase your access to this program and other government programs can help SMEs get access to cash flow at critical stages in conducting R&D.

What is the benefit of claiming?

In instances where an eligible entity’s aggregate turnover is less than $20million and they are in tax losses, by lodging an R&D claim it is possible to cash out tax losses associated with the conduct of R&D activities, providing much needed cash flow instead of accumulating further tax losses that can only be accessed when the business is profitable.

For example, in this scenario if you were to lodge an R&D claim with eligible R&D expenditure of $100,000, there is potential to receive a cash refund of $43,500. The cash refund could then be used to fund other R&D activities.

What do I need to do to move this opportunity forward?

Eligible claimants have ten (10) months from the end of their financial year in which to register their eligible R&D activities with AusIndustry. That means it is still possible for companies to lodge an R&D claim for eligible activities conducted in the year ended 30 June 2017, as long as the application is lodged by 30 April 2018. Once registered, eligible expenditure is lodged with your income tax return, which is where the refund comes in.

For more information on your eligibility to this lucrative Government initiative, contact our R&D tax experts to find out how we can assist you to access the R&D Tax Incentive program.